BEIJING, July 29 /PRNewswire-Asia/ -- Himfr.com, one of China's leading B2B search platforms with more than 30 B2B industry websites to its name, analyzes China's dairy industry situation.
In the second quarter of 2010, sales in China's dairy industry have basically grown back to normal historical levels. Liquid dairy processing operation performance is good, but due to increases in milk and imported milk powder, the dairy industry's gross margins have decreased. The overall profitability of the industry is experiencing a declining trend. It is expected that in the second half, dairy profits will improve.
China's liquid dairy production reached 1,510,900 tons in June, indicating a year-on-year increase of 5.05%. From January to June, cumulative production has reached 8,533,800 tons, year-on-year up 8.81%. All Chinese dairy products in June have reached 1,793,200 tons, year-on-year up 5.67%. From January to June cumulative production reached 10,003,100 tons, year-on-year up 8.88 percent. This is evidence to support the Chinese dairy product industry's growth and gradually return to historical levels. Dairy production, marketing and enterprise operations are generally stable.
In the first half of this year, China's dairy business costs have risen significantly. Raw milk prices have been soaring since the second half of 2009, and in June the average purchase price of raw milk was 2.86 RMB/kg, up 0.54 RMB compare with the same period of last year. Meanwhile, imported milk powder prices are also climbing. Fresh milk's retail price is basically keeping stable, but cost pressures are increasing on dairy enterprises.
Under increasing cost pressures, profitability is declining. In the second quarter, the dairy industry realized a total profit of 1.92 billion RMB, down 11.0% over the same period from the previous year, and a decrease of 19.4% from the previous quarter. In the second quarter of 2010, dairy industry profit margins also declined -- down 5.3% - 4.6% since the last quarter. Data shows that, despite the growth of the dairy industry and the return to historical levels, due to the impact of cost pressures, current profits are still relatively limited and overall profitability of the industry is experiencing a significant decline.
In the second half of the year, with further recovery of domestic consumer confidence and the onslaught of milk's peak season, domestic consumption has increased and dairy industry and sales growth will continue to maintain a high growth rate, while corporate profitability should gradually improve.
Himfr analyzes the second half-year dairy market and consumer trends:
First, dairy products will rise in price in response to cost pressures. However, the dairy industry competition will remain fierce, and price wars should keep dairy prices from skyrocketing.
Second, industry growth will continue at historically normal levels. The second-half peak season will pull up consumer demand, and with accelerated urbanization in China increases in income levels, it is expected that dairy production and sales will continue to maintain a high level.
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